The bomb exploded shortly before dawn at 5:45 am (1015 IST), when the streets of western Paris were relatively quiet, blowing out windows in a 50-metre radius and setting fire to two cars.
Police chief Michel Gaudin visited the scene after the blast, accompanied by his chief of staff, who told reporters that a bag had been spotted under the embassy's windows by a worker clearing bins in the street.
"He looked inside the bag, opened it and thought it must be a bomb since he saw a cannister attached to wires. He dropped it, left the area and called the police. That's when it exploded," Jean-Louis Fiamenghi said.
"No-one was hurt but there are people in shock in neighbouring flats."
Fiamenghi said the bomb could have contained "several kilos of explosives".
No group or individual immediately claimed responsibility for the attack.
Police and fire fighters were rushed to the area and sealed off the road where the blast occured. A bomb disposal team was also in place to make any remaining explosives safe.
In Jakarta, Teuku Faizasyah, Indonesian presidential spokesman on foreign affairs, said the government there had been informed of an incident, adding: "We're still looking for clarity on whether we were the target or not.
"In the mid-2000s there was a case of a small bomb explosion at the Indonesian embassy in Paris. It turned out to be a local incident, and nothing to do with a national threat," he added, Coordinating Security Minister Djoko Suyanto told: "This is being investigated by the Indonesian embassy in Paris with coordination with local authorities."
"The Indonesian ambassador in Paris reported that the explosion took place at one of the crossroads near the embassy at 5:20 am. We don't know the target of the bomb. The ambassador is at the location but he can't go near.
"The windows were broken but there's no report yet of Indonesian or staff casualties. We are still waiting for developments," he added.